Friday, January 10, 2014
Patrick Rey (Toulouse) and Jean Tirole (Toulouse) explain Cooperation vs. Collusion: How Essentiality Shapes Co-opetition.
ABSTRACT: The paper makes two related contributions. First, and in contrast with the rich body of literature on collusion with (mainly perfect) substitutes, it derives general results on the sustainability of tacit coordination for a class of nested demand functions that allows for the full range between perfect substitutes and perfect complements. Second, it studies the desirability of joint marketing alliances, an alternative to mergers. It shows that a combination of two information free regulatory requirements, mandated unbundling by the joint marketing entity and unfettered independent marketing by the firms, makes joint-marketing alliances always socially desirable, whether tacit coordination is feasible or not.